GAM Holdings assets plummet 21% in quarter

Assets under management for GAM Holding's investment management unit fell 21.3% to 66.8 billion Swiss francs ($68.1 billion) for the quarter ended Sept. 30, amid net outflows and liquidations of unconstrained/absolute return bond strategies.

For the 12 months, assets under management fell 15.1%.

A financial update Tuesday said group assets under management, which includes investment management and private labeling businesses, fell 10.8% for the quarter and fell 1.5% for the year, to 146.1 billion francs.

Net outflows for investment management in the quarter totaled 8.5 billion francs, compared with first-half 2018 net inflows of 2.6 billion francs and 3.5 billion francs in net inflows for the three months ended Sept. 30, 2017. Figures for the three months ended June 30 were not available.

GAM said in its update that the absolute-return bond fund strategies contributed 10.8 billion francs to the decrease in assets under management. The firm also recorded net outflows from other strategies, negative foreign exchange and negative market movements over the period. Non-ARBF strategy net outflows came "against challenging market conditions for the industry and the impact from ARBF-related matters in August and September," said the update.

GAM announced in July it had suspended Tim Haywood, investment director business unit head for the unconstrained/absolute-return bond strategy, following an internal investigation. The firm later said it had received redemption requests from investors for its ARBF strategies and had decided to liquidate the relevant strategies.

ABRF strategy assets were 200 million francs as of Sept. 30, down from 11 billion francs at June 30. Net outflows from these strategies totaled 3.2 billion francs in the quarter, with a further fall in ABRF assets of 7.7 billion francs related to liquidations or coming liquidations in the next few months. The update said the June 30 figure included 8.3 billion francs in ARBF strategies and a further 2.7 billion of assets in related allocations.

Absolute-return strategies excluding ARBF totaled 2.6 billion francs, with 700 million francs in net outflows for the quarter. Fixed-income assets were 35.3 billion francs, with 2.6 billion in net outflows; while equity assets under management totaled 11 billion francs, following 1.1 billion francs in net outflows for the quarter.

Multiasset strategies totaled 8.6 billion with 700 million francs in net outflows; and alternatives assets totaled 4.5 billion francs, with 300 million francs in net outflows. Systematic strategies added 100 million francs in net inflows, totaling 4.6 billion francs as of Sept. 30.

Overall for the investment management unit, market and foreign exchange moves detracted 1.4 billion francs for the quarter.

The update said GAM has seen improving net flow trends in October, with net outflows diminishing.

"The consequences of the suspension of an ARBF investment director marked a clear setback for GAM," said group CEO Alexander S. Friedman, in a statement accompanying the update. "We are taking immediate and near-term measures to support GAM's profitability. We have a stable and diversified business that we continue to build upon and we remain fully focused on delivering the investment returns expected by our clients."

Regarding the liquidation of ARBF strategies, investors so far have received between 82% and 91% of the firm's Luxembourg and Ireland-domiciled Undertakings for Collective Investment in Transferable Securities strategies, and between 66% and 72% of assets in the Cayman and Australian feeder strategies. Remaining assets will be liquidated over the coming months dependent on market conditions, said the update.

GAM's share price was 6.08 francs at 5:30 P.M. Central European Summer Time Tuesday, down 17% for the day.